We recently purchased a home, but to get the final appraisal we had to sign a note to pay sellers $6000 to allow it to proceed. Is this legal?

Asked by Pearldr57@att.net, San Jose, CA Tue Nov 29, 2011

The sellers would not allow appraisal to proceed. They asked for cash outside the contract and made us sign a payment letter to pay them $1000/month for 6 months. I paid two months then told them I would not pay anymore. They file a small claims against me.

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Sally Blaze, Agent, Eugene, OR
Tue Nov 29, 2011
Seek legal advice immediately. I would also contact your real estate agent's broker. This can usually be found online under the name of the real estate firm representing you.

Sally Blaze
Alain Pinel Realtors
3 votes
charles butt…, Agent, san jose, CA
Tue Nov 29, 2011
The seller's demand that you pay them outside the contract, in order to complete the transaction is improper at best and illegal at worst.

This is definitely a legal issue. I recommend that you contact a Real Estate Attorney.

I know an excellent Real estate Attorney who will give you excellent legal counsel with respect to this matter.

The Attorney is Mr. Ron Rossi. Telephone number: (408)261-4252
3 votes
Terri Vellios, Agent, Campbell, CA
Tue Nov 29, 2011
There is not enough information and as you have received it is a legal nature and should be answered by a real estate attorney. I wonder if this was this a short sale or bank owned property?

Find all your documents you signed, and take them with you to the attorney.

All the best to you.
Web Reference:  http://www.terrivellios.com
2 votes
, ,
Tue Nov 29, 2011
You should consult an attorney for legal advice.

Best regards,

Elva Wormley
C2 Financial Corporation
2 votes
David Sciplin, Agent, San Jose, CA
Tue Nov 29, 2011
Hi Pearldr57,

One thing that’s difficult about chat boards is understanding the exact meaning of what people write. I read this a little different than Pat. Are you saying to seller would not allow the appraiser to finish unless you paid them $6,000? Either way did you talk to your agent and did your agent have a conversation with the seller’s agent? For others that read this, this is a perfect reason the buyer and seller should not have direct contact. Without the complete details, this sounds very bad. I will withhold the word illegal because I’m not an attorney. If the seller has already filed the court action, make sure you send an answer to the court. You will lose if you don’t file an answer. Then find an attorney as soon as you can. Maybe they can help you with the answer. Please, please, please always tell your agents what’s going on. It’s your agent’s responsibility to protect your interests. And never sign anything outside escrow.

Good Luck To You!

David Sciplin
Coldwell Banker
Web Reference:  http://www.calresciplin.com
2 votes
Grace Hanamo…, Agent, Cupertino, CA
Tue Nov 29, 2011
Hi Pearl:

As the other two Realtors already mentioned, nothing about what you're saying sounds correct, however, at this time the situation you're mentioning is a legal matter, and, as such, your best answers will come from a qualified real estate attorney in your area.

Typically, payments are not allowed to be made outside of the sales contract. Your Realtor should have discussed this with you. Also, an appraisal does not require the Seller's consent to be completed. If you're saying that the sellers prevented you and the appraiser from entering the home without "bribe" money, well, then that's highly suspect, and I have to ask "why" you, as the buyer, would agree to buy a home when the sellers were so uncooperative.

My suggestion is that you immediately contact an attorney and have him/her help you with this matter. I know it's only small claims court, but without knowing the principles of law, you will be unable to effectively fight this matter in court. If you do not know of any real estate attorneys, you can contact David Van Atta at the offices of Hanna & Van Atta in Palo Alto, or you can speak with Cappy Myers, who is a frequent Real Estate professional here on Trulia at (408) 348-3740.

Good luck!!

Grace Morioka
Area Pro Realty-People's Choice
2 votes
Pat Chadwell, Agent, Campbell, CA
Tue Nov 29, 2011
Not sure if we have all the data. It sounds like the appraisal came in lower than the sales price. Then it sounds like the sellers still wanted their sales price. Is that correct? Was this on an addendum? Did your lender know this information? I am assuming this was not in the closing instructions you signed? The action of making payments outside of the contract is highly suspect. You should consult with a CA Real Estate attorney.

Pat Chadwell, broker
Realty World - Residential Specialists.
408-927-6565 x 11
Web Reference:  http://patchadwell.com
2 votes
Scott Godzyk, Agent, Manchester, NH
Tue Nov 29, 2011
That could be HIGHLY illegal. All financial information MUST be disclosed on the HUD (ferderal law) and signed at closing by teh seller and buyer. There can not be under the table or outside of closing agreements or payments. You should contact your agent and closing attorney for help and assistance.
Web Reference:  http://www.ScottSellsNH.com
2 votes
John Hanson, Agent, San Jose, CA
Wed Nov 30, 2011
I am going to take a little different view in answering this question.
i would bet that what happened is that your appraisal came in low and that what you were ask to do was make up the difference between the purchase price and the appraised price in order to get the loan.
this is very common these days as appraisers have a hard time getting good comps do to all the distressed sales going on. So then if you want the property many times you are asked to make up the difference between sales price and appraisal as the lender will use the lesser of the two values. Make sure to check your closing documents to see where that money went. If it was done out side escrow then you probably do have an issue.
1 vote
, ,
Tue Nov 29, 2011
WOW! Can you say, "FRAUD!?!?!?!" Hire yourself a NASTY Attorney. Then go to the District Attorney and get this thing turned around. This is completely and totally ILLEGAL!!!!

If your Mortgage Lender finds out about this side deal you could suffer some serious consequences, not the least of which includes fines and imprisonment for mortgage fraud.

IMMEDIATELY hire an Attorney.

Trevor Curran NMLS #40140

P.S.: Why the heck is it that around the country, Buyers don't get protection when buying homes by hiring attorneys? Here in the NY Metro Region, NO DEAL CLOSES WITHOUT AN ATTORNEY for BUYER and SELLER. My skin crawls like I'm watching a Stephen King horror movie when I hear stories like this!
Web Reference:  http://tcurranmortgage.com
1 vote
Mitchell Pea…, Agent, San Jose, CA
Tue Nov 29, 2011

You might want to tell your story to the Santa Clara District Attorney's office. They are the ones who decide if something was illegal and if prosecution should ensue. Before you go to any attorney, gather your documents.

There is missing information in your request. So much depends on the contracts and the whole situation. Was the home listed on the MLS? If so, the terms of the MLS had to be followed, and if they were not, there is another avenue for you to pursue. If it was not listed on the MLS, then this is not an avenue. If realtors were involved you can call the Santa Clara County Association of Realtors and ask for the ethics department and to be referred to the MLS help line. They will describe how you can seek assistance from them.

Before claiming fraud, all your documents need to be reviewed. We on this forum cannot tell if you had a realtor, and if so whether the sale involved a lender on the seller's side or was a short sale. A seller can demand an earnest money deposit prior to allowing an appraisal. Perhaps that is all they were asking for. So before jumping to conclusions, it would be good to get all the details. The resources I have given you are free for you to consult.

Please let us know how it all turns out.

Mitchell Pearce
Web Reference:  http://handsonrealtor.com
1 vote
Andrea Wince…, Agent, Milpitas, CA
Tue Nov 29, 2011
Sounds like you need legal advice, please consult a real estate attorney, as Realtors are not qualified to give legal advice. If this had happened to me, I would also file a complaint with the California Department of Real Estate who might also involve the Department of Justice Fraud Unit. I would be highly upset at the agent who represented me in the type of transaction that you have described above - fraudulent in my opinion. Here's the Dept. of Real Estate Consumer Complaint link: http://www.dre.ca.gov/cons_complaint.html
1 vote
Shawn Ryan R…, Agent, Belleville, NJ
Mon Dec 12, 2011
cash payments made outside of the contract itself are generally illegal. all transfers of money between parties must appear on HUD-1 closing statements
0 votes
Jeff Smith, Agent, Poway, CA
Thu Dec 8, 2011
Hi Pearldr57 -
I agree there are missing pieces to this story, give us a bit more to work with on the details. It is also important to know if this was a short sale, then the Seller can really be in some hot water?
0 votes
Ruth and Per…, Agent, Los Gatos, CA
Sun Dec 4, 2011
Hi Pearld

There are two Scenarios. In either case you should get an attorney involved or call your Agents Broker.

The first scenario that it was a Regular Sale and you set up a Contract to Pay after the close.
Now you changed your mind to pay.

The second scenario is that it was a Short Sale, and you set up a Contract to Pay. If that is the case
then both you and the seller have likely committed Federal and Loan Fraud.

You are asking for legal advise on Wrongs committed by both parties in this case you the Buyer and the Seller. It seems it was a Short Sale, as you indicate " to pay sellers $6000".
As part of any Short Sale agreement with the Banks involved the Seller is not supposed to benefit.
I am sure you have signed the Form and so did the sellers.

Clearly, after buying the house and moving in you feel you should not honor a Business Contract.
Better get an attorney involved as well as your agent and his attorney.

If the Small Claims Judge refers you both to the District Attorneys office, you and the sellers will be
charged with Loan Fraud and possibly can be Federal.

Clearly, you are admitting in Black and White on this board.

If the Small Claims Court victory goes to the previous Sellers, then they can put a lien on your home, and take other nasty steps against you.

Good luck.
0 votes
Lillie Missb…, Agent, San Ramon, CA
Fri Dec 2, 2011

I would call the Realtor that you dealt with. They should have a lawyer affiliated with the brokerage that should be consulted on cases like this. You may find that you have a couple of issues here. Your realtor should consulted with you against such a thing first of all and secondly, everything should have been done through escrow! What has been done was or sounds ilegal. If they aren't willing to help you, I would consult an attorney. If you need help with the property you purchased, please give me a call and we can go over what you purchased, etc. and see if you got taken. Again, don't hesitate to call. I am a Short Sale Specialist, HAFA and REO certified as well.

Best regards,

Lillie Missbrenner, Realtor
Better Homes and Garden Previously Prudential California Realty
0 votes
John Arendsen, Agent, Leucadia, CA
Wed Nov 30, 2011
Very good call there john. It will be interesting to hear Pearldr's response
0 votes
John Arendsen, Agent, Leucadia, CA
Tue Nov 29, 2011
Trever, Like the Stephen King scenario.
0 votes
John Arendsen, Agent, Leucadia, CA
Tue Nov 29, 2011
Wow!! This sure sounds totally out of proper protocol for any RE transaction. This has more kinks than a tangled garden hose. You need some legal guidance for sure. Did you use a RE professional? If you did I'd start the ball rolling there.
0 votes
Beth Mitro, Agent, Henderson, NV
Tue Nov 29, 2011
Sounds like you are not working with an agent or realtor. Realtors are FREE to buyers...
0 votes
Pete Nemeth, Agent, Greenwood Village, CO
Tue Nov 29, 2011
This sounds like blackmail. The sellers should never be able to hold you hostage like that. Your realtor should be intervening in this..
0 votes
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